Download Labour Market Distortions and University

Current Research Journal of Economic Theory 4(3): 67-76, 2012
ISSN: 2042-485X
© Maxwell Scientific Organization, 2012
Submitted: March 08, 2012
Accepted: April 04, 2012
Published: June 30, 2012
Labour Market Distortions and University Graduate Unemployment in Nigeria:
Issues and Remedies
Godwin E. Bassey and Johnson A. Atan
Department of Economics, University of Uyo, Uyo, P.M.B. 1017, Nigeria
Abstract: This study is an attempt to appraise the existing gap between the demand for and supply of university
graduates in the Nigerian labour market. The study emphasizes that serious distortions exist in the market for
university graduates in Nigeria, giving rise to unacceptable high level of graduate unemployment. The
phenomenon of rising graduate unemployment is bound to have serious adverse social and economic
consequences on the Nigerian economy. The study traces the problem to the declining quality of education,
resulting from inadequate funding, insufficient and outmoded learning materials, poorly trained staff, irrelevant
curricula and inadequate information on job vacancies for job seekers in the market. The study recommends,
among others, the establishment of labour market information system, a legal framework for labour market
information management and improved funding of university education to effectively harness the products of
the Nigerian universities for sustainable economic development.
Keywords: Graduate unemployment, labour market, Nigeria
surveyed, of which Nigeria ranked as the second most
distorted economy being only surpassed by Ghana.
Within the Nigerian labour market, distortions are
prevalent. These are exemplified in the rising incidence of
unemployment among university graduates and those of
other tertiary institutions, wage rate differential not related
to productivity and rural-urban migration, among other
vices. Theoretically, it is argued that distortions result in
the shrinking of a country’s production possibility frontier
by making the ratio of marginal productivity of each pair
of factor input not to equalize thus, forcing the economy
to produce outside the contract curve in a two-factor
commodity space (Atoyebi and Odedokun, 1987). Among
the major sources of endogenous distortions in the
Nigerian labour market, as highlighted by Magee (1973)
include imperfect knowledge, rural-urban dichotomy,
ethnicity, monopoly power through trade unions, seniority
not related to economic superiority, discrimination and
disguised unemployment. For policy induced distortions,
the author identified taxation, subsidies and minimum
wage policy and quota system as possible factors. On the
whole, it is the issue of rising incidence of unemployment
and indeed, graduate unemployment that has aroused the
greatest concern because as noted by Obadan and Odusola
(2003) “apart from representing a colossal waste of a
country’s manpower resources, it generates welfare loss
in terms of lower output, thereby leading to lower income
and well-being” (p.1).
Gbosi (2006) defined unemployment as a situation in
which people who are willing to work at the prevailing
wage rate are unable to find jobs. A more encompassing
INTRODUCTION
Nigerian has the potential for rapid economic growth
and development, given her rich human and material
resources. Yet, the economic performance of the country
has been described as erratic, dismal, truncated and
largely unimpressed (Ajayi, 2002; Iyoha and Oriakhi,
2002; Kayode, 2004; Ekpo, 2008). The poor growth
performance of the economy is depicted in the rising
incidence of poverty, massive and graduate
unemployment, skyrocketing inflation, worsening balance
of payments disequilibrium, monumental external debt
burden, widening income disparity and growing fiscal
imbalances, which taken together constitute Nigeria’s
crises of underdevelopment. These problems are rooted in
the pervasive distortions existing within the economy
(Ekpo, 1987).
Distortion is defined as a divergence between
marginal private valuation and marginal social valuation
(Atoyebi and Odedokun, 1987). It exists when the prices
of goods and services, as well as capital and labour, do
not correctly reflect their scarcity (World Bank, 1983).
According to Atoyebi and Odedokun (1987), distortions
result from market failure and are endogenous or policy
induced. They serve to destroy the Pareto optimality
within the domestic economy by creating a divergence
between the market price and social opportunity cost.
Interestingly, the World Bank (1983) as cited in Atoyebi
and Odedokun (1987) indicated that between 1970 and
1980 distortions explained about one third of the
variations in the growth performance of 31 counties
Corresponding Author: Godwin E. Bassey, Department of Economics,University of Uyo, Uyo, P.M.B. 1017, Nigeria, Tel.:
+2348027604869
67
Curr. Res. J. Econ. Theory., 4(3): 67-76, 2012
theory” (on the supply side) and the “wage fund” theory
(on the demand side).
On the supply side, the subsistence wage theory
posits that every specie (or individual) naturally multiplies
in proportion to the means of his subsistence and no
specie can ever multiply beyond it. This implies that there
exists a strong connection between the demand for labour
and its supply (Iniodu and Ukpong, 2001). The demand
for labour depends on the wage fund designed for the
payment of wages, which consists of the revenue which
is over and above what is necessary for its maintenance
and the stock which is over and above what is necessary
for employment by employers (Iniodu and Ukpong,
2001). To the neo-classicists, the supply side of the labour
market is infinitely elastic at what they called “natural
price” of labour. This is defined as that “price which is
necessary to enable the labourers to subsist and perpetuate
their race without either increases or diminutions”
(P.105). This natural price of labour thus depends on its
cost of production-the price of food, health care,
education and other “necessaries“ required to support the
labourer and his family (Iniodu and Ukpong, 2001). On
the demand side for labour, their crucial assumption was
that of diminishing returns to agriculture and industries
which implies downward sloping demand curve for
labour, thus separating average and marginal productivity
of labour (Iniodu and Ukpong, 2001).
The Keynesian orthodoxy, on the other hand,
presented a disequilibrium model in which the demand for
labour depends upon the real wage rate, equals to the
marginal product of labour (Ekpo, 1987). The supply of
labour depends upon the money wage rate with the usual
trade off between leisure and labour. Workers are
presumed to be ill-informed about the general price level
but are alert to the absolute amount of their money
income (Ekpo, 1987). Following the formulation by Ekpo
(1987), the Keynesian disequilibrium model of labour
market can be specified as follows:
definition is provided by the International Labour
Organization (ILO) as cited in Akintoye (2008) thus: “ the
unemployed is a member of the economically active
population, who are without work but available for and
seeking for work, including people who have lost their
jobs and those who have voluntarily left work” (p.98).
Unemployment assumed a doomsday scenario in Nigeria
a decade after political independence. Account by
Akintoye (2008) showed that between 1970 and 1980,
national unemployment rate rose from 4.3 to 6.4% and
further rose to 7.1% in 1987. The author attributed this
development to the economic depression which engulfed
the nation form 1980, resulting in massive closure of
businesses and retrenchment of workers. This was
followed by the placement of embargo on recruitment
which further worsened the unemployment situation.
However, the author reported that the Structural
Adjustment Programme (SAP) had a salutary effect on job
creation leading to a sharp fall in unemployment rate from
7.1% in 1987 to 1.8% in 1995. Thereafter, unemployment
figure hovered around 4% between 1996 and 2000.
One worrisome trend in the Nigeria labour market of
recent has been the growing incidence of unemployment
among professionals such as accountants, engineers and
other graduates from universities and other tertiary
institutions. Akintoye (2008) reported that graduate
unemployment as a percentage of total unemployment
rose from 1% in 1974 to 4% in 1984. Dabalen et al.
(2000) also reported that graduate unemployment
accounted for 32% of the total unemployed labour force
between 1992 and 1997. This growing incidence of
graduate unemployment in the face of acute skill
shortages presents a paradox which further complicates
the analysis of labour market distortions in Nigerian.
Expectedly, employment generation (or unemployment
reduction) has remained the central focus of macroeconomic goals in Nigeria. It is a continuing policy and
responsibility of the federal government to use all
practical means to promote higher level of employment,
production and purchasing power (Essien and Atan,
2006).
In this study, attempt is made to contribute to the
resolution of this paradox by taking a look at the demand
and the supply sides of labour market for university
graduates in Nigeria as well as appraising the existing gap
in the employment market for university graduates.
Let NT
W
MPN
P
NS
= Demand for labour
= Money wage rate
= Marginal product of labour
= Price level and
= Supply labour.
The model consist of six equations:
THEORETICAL BACKGROUND
Both the neo-classical tradition and the Keynesian
orthodoxy can be invoked to explain the observed labour
market behavior for Nigerian graduates. Like every other
market, labour market is made up of the supply side and
the demand side of the market. Following the neoclassical tradition, the theoretical connection between the
two sides of the market is based on the “subsistence wage
68
Nd = f (W/P) …
(1)
W/P = MPN …
(2)
MND/MW/P < 0 …
(3)
MNS/ MW = g (W)…
(4)
Curr. Res. J. Econ. Theory., 4(3): 67-76, 2012
NS/W >0 …
(5)
Nd = NS …
(6)
the wage rate. Rejecting this claim in the Nigerian
case, Ekpo (1987) had this to say:
“The Nigerian experience largely suggests that the
demand for and the supply of labour are influenced
by forces outside the market. It is an open secret that
state of origin, ethnicity, religion, rate of profits,
social class are important variables in any serious
discussion on Nigerian labour market “(p.8).
As can be gleaned from the above formulation, the
Keynesian model possesses disequilibrium generating
force which thwarts the system from adjusting toward a
stable equilibrium. These forces are apparent in Keynes’
concept of involuntary unemployment and the expectation
gap. According to Ekpo (1987) as long as the economy
operates in the short-run with rigid prices and money
wages, the system is in disequilibrium and involuntary
unemployment becomes a distortion. Beyond the shortrun, price levels tend to change as firms begin to dispose
of their stock of inventories. However, because of the
presence of “money illusion”, money wage tend change
more slowly than the price level. Thus, the Keynesian
model moved close to reality by implying that the
“markets do not clear” (Ekpo, 1987).
Both the neo-classical and Keynesian labour market
models have been heavily criticized for their assumption
that the labour market is homogenous. Rather that being
homogenous, the labour supply is highly heterogeneous.
Elucidating on this fact, Kannappan (1985) remarked that
employment relationship covers the gamut of full-time,
part-time and temporary employments while the
administration cadre in establishment includes the salaried
executives, independent proprietors and others in charge
of small establishments with undifferentiated
responsibilities. Webb (1977) explained this point
brilliantly thus:
LABOUR MARKET TRENDS FOR
GRADUATES IN NIGERIA
For a start, the word “graduate” is used broadly in
this study to refer to individuals with any from of post
matriculation qualification or tertiary diploma or
certificate (Pauw et al., 2008). In all modern economies,
universities are places where specialized human resources
are developed. Therefore, they play a crucial role in
generating human capacities for leadership, management
and the technical expertise.
In the present day knowledge based economies that
have emerged following globalization and information
technology revolution, universities are expected to play a
pivotal role by generating, harnessing and transmitting
knowledge for sustainable development and improved
standard of living. Unfortunately, it does appear that
universities in Nigeria are yet to be equipped to carry out
these responsibilities effectively due to limited access to
university education and human capacity deficiencies.
Saint et al. (2003) reported that in 2002, Nigeria could
only boast of 15 scientists and engineers per million
persons. This compared unfavorably with 168 in Brazil,
459 in China, 158 in India and 4,103 in United States of
America. The import of this is that more needs to be done
in terms of improving access to Nigerian universities.
Generally, access to university education provides an
indicator of a country’s production of skilled manpower.
The trend in enrolment in federal universities over the
period 2001-2007 is presented in Table 1. Evidence
The labour market is like a jar of honey which is
continually being rotated at different rates and angles.
The position and shape of the honey will depend
crucially on its own flexibility or stickiness and on
the movement of the jar (p.723).
Equally criticized is the notion held by both schools
that the demand for and the supply of labor depends on
Table 1: Total enrollment in federal universities by major disciplines
Discipline
2001/2002
2002/2003
2003/2004
Admin/Mgt Sc.
29,407
29,741
45,2477
Agric
18,557
27,201
30,457
Arts
31,182
31,456
35,585
Dentistry
Education
33,782
33,798
48,230
Engr. tech
47,278
50,983
51,816
Environ.Sc.
10,864
14,676
18,036
Law
14,396
13,896
15,430
Medicine
26,360
25,426
28,001
Pham.
5,727
5,873
5,967
Science
59,360
74,933
78,761
Soc. Sc.
45,320
38,154
54,450
Vet. medicine
3,474
3,365
7,273
Total
325,707
349,502
419,253
Annual growth
7.3
20.0
NBS Annual Abstracts of Statistics (2008)
69
2004/2005
47,886
26,455
38,589
48,880
59,702
18,853
18,506
31,540
5,538
97,724
52,924
3,771
450,377
7.4
2005/2006
29,757
22,022
33,998
48,889
51,824
17,968
16,299
25,884
4,740
75,187
56,725
3,735
398,386
-12.6
2007
43,808
22,604
37,652
727
52,988
51,421
18,065
15,008
26,338
5,2h61
76,704
53,946
3,066
412,588
4.9
Curr. Res. J. Econ. Theory., 4(3): 67-76, 2012
from the Table shows that enrollment into federal
universities in Nigeria increased from 325, 707 in the
2001/2002 session to 412,588, reflecting increased
demand for university education. This gives an average
annual increase of about 4.4%. The highest enrollment
occurred in 2004/2005 session with a total enrollment of
450,377 students. In terms of annual growth rate, total
enrollment grew from 7.3% in 2002/2003 session to peak
at 20% in the 2003/2004 session. Thereafter, it declined
sharply to 4.9% in the 2006/ 2007 session. It is significant
to note that total enrollment recorded a negative annual
growth rate of -12.6% in the 2005/ 2006 session. A
declining trend in enrollment growth in the face of rising
demand for university educations mirrors the growing
difficulty in getting admissions probably due to falling
academic standards at the secondary and primary school
levels. It may also reflect inability of federal university to
cope with growing admission pressures due to
overstrained and decaying facilities as well as dearth of
academic staff.
In terms of academic disciplines, the Table reveals
growing enrollment into the science and engineering
programmes. The combined enrollment into engineering,
medicine and sciences increased from average of 44, 333
in 2001/2002 session to average of 54,154, representing
average annual increase of 3.2%. The share of the
programmes in total enrollment declined marginally from
40% in 2001/ 2002 session to 39.4% in 2006/2007
session.
In comparison, academic programmes in business,
arts, education and social sciences recorded average
enrollment of 34,922 in 2001/2002 session as against
47,099 in 2006/2007 session, representing average annual
increase of 5.8%. The share of these programmes in total
enrollments increased from 42.9 to 45.7% during the
period.
Table 2 presents a gory picture of the bleak
employment prospect for university graduates in Nigeria
since they belong to the professional and executive cadre.
In 1990 although 10,182 applied for jobs, only 3,695
vacancies were declared out of which 986 (9.6%) were
recruited. The situation was worse in 2000 (eleven years
after) when 104,960 registered unemployment vied for a
meager 115 vacancies of which only 110 were recruited.
It is disturbing to note that whereas the number of
registered unemployment was soaring high over time, the
number of declared vacancies was reducing steadily,
betraying the crippling nature of the Nigerian economy.
In Table 3 the rate of unemployment by age group is
depicted. The Table illustrates the alarming nature of
graduate unemployment in Nigerian since majority of the
new entrants into the labour market falls into the age
bracket of 15-24 years. In this age bracket, the rate of
unemployment averaged about 30% unemployment
averaged about 30% between 2003 and 2007 as against
Corroborating this fact, Saint et al. (2003)
commented as follows:
However, efforts to expand enrollment and improve
educational quality are severally constrained by the
growing shortages of qualified academic staff.
Between 1997 and 1999, the numbers of academic
staff declined by 12% even as enrollment expanded
by 13%. Long term brain drain, combined with
insufficient output from national postgraduate
programmes in the face of rising enrollments, has left
the federal university system with only 48% of its
estimated staffing needs filled (p.8).
Table 2: Registered unemployed and vacancies declared (professional and executives) 1990-2004 (selected years)
Vacancies
Placement
Percentage of placement
Year
Registration
declared
to vacancies
1990
10,182
3,695
986
26.6
1993
108,153
12,605
79
0.001
1995
32,442
3,708
49
1.3
1998
99,376
38
2
5.3
2000
104,960
115
110
95.7
2001
84,359
127
93
73.2
2002
94,663
121
102
84.3
2003
61,961
917
657
71.6
2004
87,731
617
510
82.7
CBN Statistical Bulletins 2002 and 2008
Percentage of placement
to registration
9.6
Negligible
-do-do-do-do-do1.1
0.005
Table 3: Unemployment rates by age group (2003-2007).
Age brackets
--------------------------------------------------------------------------------------------------------------------------------------------------------Year
15-24
25-44
45-59
50-64
All groups
2003
32.1
14.7
10.7
13.4
14.8
2004
28.9
11.4
7.7
10.1
13.4
2005
34.2
11.3
6.6
9.7
11.9
2006
30.8
8.8
4.8
7.3
13.7
2007
30.7
8.5
4.5
7.1
14.6
NBS Annual Abstracts of Statistics (2008)
70
Curr. Res. J. Econ. Theory., 4(3): 67-76, 2012
Table 4: Output of Nigerian Universities by discipline 1990-2005
S. No. Discipline
1990
1992
1994
1996
1997
1
Administration
2,890
3,471
3854
2,726
3,283
2
Agriculture
1,138
1,220
2,307
2,218
3,197
3
Arts
5,003
2,711
6,549
6,955
7,118
4
Education
11,687
6,728
11,529
15,713
14,697
5
Engineering/tech. 1,848
16
2,735
3,104
3,720
6
Environmental sc. 989
372
515
769
964
7
Law
2,222
1,228
1,175
1,576
1,970
8
Medicine
355
895
1,726
2,212
1,353
9
Pharmacy
534
243
392
374
411
10
Sciences
4,306
2,716
6,089
7,078
7,508
11
Social sciences
5,643
4,386
8,049
8,150
10,076
12
Veterinary
174
103
1,506
259
274
medicine
13
Others
206
924
Total
37,389
25,928 47,346
5,043
55,571
National Bureau of Statistics: Annual Abstracts of Statistics (various issues)
1998
1,022
1,022
811
1,406
2,187
1,068
307
253
559
41
1,534
3,518
2001
14,078
2,248
6,h655
10,520
5,852
1,787
2,927
2,921
255
9,180
11,689
119
2002
14,078
2,966
7,645
10,520
6,497
1,811
4,498
2,665
494
9,060
18,909
205
2003
19,153
3,012
8,743
10,026
7,227
2,187
5,896
2,895
417
11,308
17,345
254
2004
12,895
2,869
6,692
8,363
5,808
1,822
3,877
2,644
710
8,303
14,122
118
2005
8,530
974
3,829
5,665
2,012
1,502
1,681
732
42
6,702
7,283
61
31
12,855
1,255
67,356
1,770
80,956
1,649
87,222
950
69,171
491
39,504
2002
100.0
16.6
16.1
57.4
9.9
2003
100.0
11.0
18.3
59.7
11.0
2004
100.0
14.9
15.8
52.8
16.5
2005
100.0
Na
Na
Na
Na
Table 5: Percentage of unemployed person by level of education in urban and rural Nigeria 1990-2005
Edu. level
1990
1992
1994
1996
1998
2000
2001
All levels
100.0
100.0
100.0
100.0
100.0
100.0
100.0
No schooling
18.4
19.0
15.6
20.0
28.2
11.9
14.0
Primary
25.3
3.7
14.8
11.5
15.8
26.2
21.0
Secondary
54.4
61.7
69.9
51.3
49.5
52.8
55.2
Post secondary
2.0
5.6
9.8
17.2
6.5
9.1
9.7
National Bureau of Statistics: Annual Abstracts of Statistics (various issues.)
the national figure of about 13%. Whereas the national
rate of unemployment showed a steady decline over the
period, the rate unemployment among new entrants
(graduates) showed an upward trend.
Labour market demand for university graduates: The
demand for labour is derived from production and
distribution activities in the goods and service sectors. As
a result, its size and shape are sensitive to what happens
in the national economy (Dabalen et al., 2000). The
demand for labour in Nigerian economy has been poor
and volatile at best. It is perhaps the most difficult
challenge getting or securing accurate information on
labour demand while collecting labour market
information. As noted Dabalen et al. (2000), the reason
for this is that, hiring decisions by firms are typically
uncoordinated and in many cases unannounced.
Additional labour analysis problem in Nigeria stems
from the fact that no systematic collection of labour
market information takes place. In many cases,
information on labour demand are obtained through
secondary data such as manpower surveys, the labour
market studies and direct interviews with major
employers.
One way of examining the contribution of university
education to the demand for labour is by taking a look at
unemployment in Nigeria by level of education. From
Table 5, two important conclusions can be drawn about
labour market conditions in Nigerian. First, school leavers
with more than secondary education experience
significantly lower unemployment rate than those with
secondary education or less. The difference is very sharp
when secondary school leavers are compared with postsecondary graduates. This suggests that graduates of
universities and other tertiary institutions stand better
chances of obtaining employment compared to those with
only secondary education or less.
Labor market supply of university graduates: The
composition of skills or specialization that entered the
labour market between 1990 and 2005 is given in Table 4.
At the beginning of the period, the largest share of labour
market entrants with university education found
employment in education sector.
For a populous country such as Nigeria, where
delivery of education services is an urgent matter, it is not
surprising that many of the university graduates are
absorbed into the education sector. However, increase in
the supply of other crucial skills such as medicine,
phamrmacy, agriculture and engineering have been much
less dramatic.
Judging by the sizes of graduate output, evidence
from Table 4 suggests a tendency for the federal
universities to produce fewer graduates in crucial areas. In
1996, education and social sciences supplied 15,713 and
8,150 graduates respectively. In contrast, science-related
majors who entered the labour market that year were
about 7,000. In more specialized professional disciplines
such as medicine and pharmacy, the numbers were even
much smaller. About 2,121 graduates in medicine, 374
pharmacists and only 259 veterinary medicine graduates
were produced for a nation of about 140 million people.
The number of gradates in some critical areas should be
a source of concern since there is a shortage of these
skills. The analysis so far reveals that the supply of
university graduates in Nigeria has grown over time
particularly in the fields of education, social sciences and
arts.
71
Curr. Res. J. Econ. Theory., 4(3): 67-76, 2012
Table 6: Applications and hires into the federal civil service
Number of
Number of
Proportion
Years
applications
graduates
of graduates
1993
9,650
1994
8,694
5673
65.2
1995
14,312
9398
66.5
1996
10.250
7220
70.4
1997
19,441
6390
65.6
1998
8,172
5139
62.9
1999
63,414
n.a
n.a
2000
50,500
n.a
n.a
National Bureau of Statistics, Annual Abstracts of Statistics (various issues)
Table 7: Advertised job openings in the Nigerian economy 1991-1999
1st quarter
1st quarter
1st quarter
1st quarter
Sub-sector
1991 Nos. (%) 1993 Nos. (%) 1994 Nos. (%) 1996 Nos. (%)
Engineering
191
18
267
23 136
16 181
30
Computer
97
9
79
7
52
6
19
5
Administration 176
16
159
4
249
30 109
28
Accounting
147
14
173
15 139
16 44
11
Marketing
132
32
90
8
84
10 61
16
Education
96
9
73
6
74
9
10
3
Insurance
30
3
40
4
17
2
6
2
Agriculture
34
3
23
2
1
0
4
1
Health
165
15
245
21 93
11 18
5
Total
1068 100 1147
100 845
100 389
100
Labour Market Quarterly Report, NISER Ibadan in Dabalen et al. (2000)
Second, the employment opportunity of postsecondary graduates has been declining over time. In
1990, only 2% of the unemployed had post-secondary
education. The number increased to 17% in 1992 and
16.5% in 2004. This finding supports the argument that
unemployment rates among university graduates and
graduates of other tertiary institutions have been on the
increase in recent times.
1st quarter
1997 Nos. (%)
65
17
61
16
65
18
87
23
6
18
5
1
5
1
4
1
14
4
375
100
Number of
offers
2,459
617
756
329
179
138
226
3,301
1st quarter
1998 Nos. (%)
53
18
35
12
61
20
45
16
52
17
20
7
2
1
31
10
302
100
1st quarter
1999 Nos. (%)
72
10
72
10
73
20
80
11
9
1
1
0
2
0
6
1
390
50
703
100
Percentage of
absorption
25.5
7.1
5.3
3.2
1.9
1.6
0.4
6.6
Total 1991
-1999 Nos. ( %)
902
19
415
9
895
19
719
15
439
9
277
6
100
2
72
2
955
20
4774
100
From the Table, it is obvious that the absorptive
capacity of the Nigeria Federal Civil Service continued to
degenerate over time, thus compounding the problem of
graduate unemployment in Nigeria.
The private sector: A review of labour market research
in Nigeria leads to two consistent observations,
concerning graduate employment in the private sector.
First, the share of graduate employments in the private
sector, both historically and at present, had been smaller
than the share in the public sector. Second, the share of
graduates finding jobs in the pubic sector has fallen
drastically relative to the private and self-employment
sector. These bleak prospects for graduate employment
have caught the attention of policy markers as well as
media commentators. It is hard to ignore labour market
studies that reported high unemployment rates among
graduates. One of these is the manpower surveys by the
Manpower Board in which just 51% of those who
graduated in 1994/95 claimed to have been employed in
contrast to an overall graduate employment rate of 80%
for all respondents to this particular study (Omoifo et al.,
1997). The estimate above is also consistent with the
recent labour market studies that reported 22% of the
graduates surveyed as unemployed (Federal Government
of Nigeria: National Manpower Board, 1998).
Sources of labour demand for university graduates:
Dabalen et al. (2000) identified three major sources of
employment for Nigerian University graduates. These are
the public sector, the private sector and self employment.
The public sector: The pubic sector comprises
government ministries, schools and parastatals.
Traditionally, the public sector is regarded as a major
employer of graduates from universities and tertiary
institutions. The establishment surveys showed that the
public sector in Nigeria absorbed about 60% of the formal
sector workers in the 1990s (Dabalen et al., 2000).
In their incisive study of labour market for Nigerian
graduates, Dabalen et al. (2000) confirmed from
manpower surveys and tracer studies that 58 and 35% of
graduate employees worked in the public sector in 1984
and 1991 respectively.
However, a close study of the applications and hires
into the Federal Civil Service in Nigeria reveals a very
gloomy prospect for graduate employment in Nigeria. As
depicted in Table 6, whereas 14,312 applications were
received in 1995, of which university graduates accounted
for 66.5%, only 756 job offers were made, representing
about 5.3% of the labour supply. Throughout the 1990s
less than 10% of the job applicants were able to find jobs.
The demand for critical skills (university graduates):
For decades, the Nigeria Institute of Social and Economic
Research (NISER) in Ibadan has monitored advertised job
openings in the Nigeria economy. It is observed that many
job vacancies are usually filled without advertisement.
Table 7 reproduced from Dabalen et al. (2000) presents
72
Curr. Res. J. Econ. Theory., 4(3): 67-76, 2012
from the wide gap that exists between what is taught in
the universities and what the employers of labour actually
require. Citing some tracer studies, Dabalen et al. (2000)
pointed out that the graduate of Polytechnics assigned
more favourable grading to “use of knowledge acquired
during study to my work” than university graduates, thus
suggesting that university programmes lack practical
content. Among the university graduates that are able to
find work, employers express major reservations
concerning the quality of their education. There are three
widely agreed points with regard to the quality in
university education which leads to the existence of the
gap between the world of work and the world of learning.
information showing the pattern of vacancies in various
professions between 1991 and 1999.
Record of announced vacancies for high level skills
in nine major sub-sectors of the economy is presented
above during the entire period. The largest number of
advertised job openings was in health sub-sector (20%).
This was followed closely by engineering (19%),
administration (19%) and accounting (15%). Other subsectors with relatively fewer vacancies were marketing
(9%), computer services (9%), education (6%), insurance
(2%) and agriculture (1%). The higher number of
advertised vacancies in the health sub-sector is a recent
phenomenon. The sudden rise in demand for health
workers should not be surprising. The appearance of
HIV/AIDS as a national concern would lead to demand
for more trained medical personnel.
C
THE GAP
From the analysis so far, a large mismatch appears to
exist between the labour market demand and the labour
output or supply for Nigerian graduates. The same
analysis shows that the employment prospects of new
graduate entrants have drastically deteriorated. The main
reason for this poor employment condition (gap) is the
weak performance of the Nigerian economy. There are
two reasons for this bad performance. One is the policy
environment which in this case includes the institutions
that structure incentives to reward investment in
productive assets. The second reason is an inadequate
level and quality of inputs that businesses in the economy
employ. One vital input is skilled human resources,
especially the quality of the university trained portion of
the work force.
It is widely accepted that the policy environment for
economic growth in Nigeria has not been favorable for
many years. A discussion of why this has been the case is
not the subject of this study. But suffice it to say that the
Nigerian economic policy environment, particularly in the
educational sector, has been characterized by policy
inconsistencies, lack of focus, half-hearted
implementation, bureaucratic bottlenecks and massive
corruption.
The second variable-the quality of skilled labour-is
germane to the discussion as it has exacerbated distortions
in the labour market. From the analysis so far, it is clearly
demonstrated that one major source of the gap is the
abundance of university trained labour vis-à-vis demand.
Many university graduates are produced than the
economy can absorb and has resulted in a graduate
unemployment rate in many areas.
Because so many people in whom the public
resources have been invested are idle or unproductively
utilized, the social costs to the nation, measured in terms
of lost productivity are enormous. Another reason arises
C
Quality deterioration is accelerating: It is observed
that the quality of university graduates had worsened
over time. It is also believed that the decline in
quality levels is actually increasing rather than
leveling off. Studies by Anyanwu and IIoeje (1998)
revealed that a major employer in the
telecommunication sector confesses that some recent
graduates do not have even basic skills. Re-echoing
the same problem, Saint et al. (2003) observed that “
a study of the labour market for graduates found that
employers believe that university graduates are
poorly trained and unproductive on the job… and
short comings are particularly severe in oral and
written communication and in applied technical
skills”
Quality deterioration is of particular concern in
key skill areas: Beyond their general agreement
regarding falling standard of university education,
many employers cited key skill areas as particularly
worrying. According to Ugwuonah and Omeje
(1998), two of these skill areas were communication
and technical proficiency. Poor abilities in the oral
and written expression in English were mentioned
almost like a chorus. Graduates in systems analysis
and in electronic data processing were especially
critical of their training.
These findings illustrate the wide gap that exists
between what is taught in the universities and what the
labour market requires. Among the reasons adduced for
the quality deterioration in university education are
incessant strikes, lack of employee motivation, weak
accountability for educational performance, shortage of
staff, corruption and admissions based on quotas rather
than merit (Saint et al., 2003).
C
73
Poor quality staff produces poor quality
graduates: Many scholars and employers are quick
to state that the quality of the graduates supplied is a
reflection of the quality of academic staff, learning
resources (libraries and laboratories, etc) and funding
limitations. The problems of staff quality are seen to
Curr. Res. J. Econ. Theory., 4(3): 67-76, 2012
Table 8: Allocation and disbursement of education trust fund to
Universities (N. m)
Disbursement
Year
Allocation Disbursement Outstanding (%)
1999
2,125.0
2,125.0
2000
1,050.0
720.0
330.0
69.0
2001
1,794.1
1,610.9
183.2
89.8
2002
2,193.5
2,281.4
(87.9)
104.0
2003
1,050.0
969.3
80.7
92.3
2004
1,515.8
536.1
979.7
35.4
2005
2,025.0
361.7
1663.3
17.9
National Bureau of Statistics Annual Abstracts of Statistics (2006)
C
C
government can not do it alone. There is need for
individual universities to partner with the private sector
and individuals on a mutually beneficial basis. Here, a
leaf could be borrowed from Britain, where “the
universities have to link with agencies outside of the
system (such as industry, business and research councils)
to supplement their income. Also, the state has created
through its national evaluation system, mechanisms
within which universities compete with each other, for
extra financial rewards from the state for good
performance (Morley, 2001).
be severe. The decline in staff quality is reflected in
the high rates of “brain drain”, the declining numbers
of professors and associate professors in the
university system. Another dimension to the problem
is the declining staff/students ratio over time. Saint
et al. (2003) reported that between 1987/88 and
1997/98 students enrollment increased by 12% while
staffing grew by just 3%. The divergence in growth
rate of staff and student numbers generated a decline
in staff/student ratios from 1:14 to 1:20. By 2000
staff/ student ratio had fallen to 1:24 (Saint et al.,
2003).
Social networks: Another central reason for this gap
in the analysis of labour market is that it does not
account for the importance of social networks in the
employment process. Here personal connections are
keys for both workers and employees. Employees are
more likely to apply for jobs where they have
personal connections and are more likely to be hired
if they apply.
Inadequate funding: It is generally admitted that
part of the yawning gap in the quality of university
graduates stem from inadequate funding. Because the
federal government provides nearly all of its
universities’ budget requirements, the financial
stability of the universities is tied to the fiscal
fortunes of the government. Unfortunately, in the last
two decades, the federal budget has not been stable.
This is because it is tied, very closely to oil revenues,
which has witnessed a lot of instability. The
instability in the funding profile of Nigerian
universities is aptly captured in Table 8. The
disbursements of Educational Trust Fund to
Universities fluctuated from N2.1 billion in 1999 to
N720 million in 2000 but rose again to N2.2 billion
in 2002 only to drop sharply to N969.3 million 2003.
Also, inadequacy of funding is reflected in the
percentage of disbursements to total allocation which
dropped from over 100% in 2002 to 35.4 and 17.9%
in 2004 and 2005, respectively.
C
Curriculum development: Most curricula of
Nigerian universities bear little or no practical
relevance to the needs of the economy. It is argued
that the university curricula emphasize “much theory
and too little practical training” (Dabalen et al.,
2000). The recent explosion in information
technology and computerization has not been
adequately reflected in the course contents of the
universities. For instance, some tracer studies pointed
out that employers repeatedly complain that many
newly hired graduates were not familiar with
computers or the tools that the company uses in
production. Graduates were also reported as
incapable of technical solutions to routine problems
as expected of individual with their levels of training.
(Anyanwu and IIoeje, 1998; Ugwuonah and Omeje,
1998). As a result, a number of firms put their
recruits through intensive post-employment training
to prepare them for their responsibilities in the work
place. This has the implication of increasing the
production cost and lowering profitability of the
business.
CONCLUSION
This study has emphasized that a serious
disconnection exists between the supply of and the
demand for graduates in the Nigerian labour market. The
mismatch has been and continues to be socially costly to
Nigeria. The large numbers of unemployed graduates and
the low productivity of those who find work reflect poor
social return on the investment.
At present, there is widespread agreement on the
broad outlined of the causes of declining quality of
education. These include inadequate financing,
insufficient and irrelevant learning material, including old
and outdated equipment, books and journals, poorly-paid
and trained academic staff, outmoded and inflexible
managerial structure, unplanned expansion of enrolment
leading to oversupply of graduates and irrelevant
curriculum.
The tragedy is that while the causes of low quality of
university education and its consequences are widely
acknowledged, there are no mechanisms in place to
The consequences of inadequate and unstable funding
of universities are reflected in the poorly equipped
laboratories, outdated libraries, poorly remunerated staff
and crumbling teaching facilities. It bears emphasizing
that in the area of improved funding of universities, the
74
Curr. Res. J. Econ. Theory., 4(3): 67-76, 2012
C
correct them. Education sector in Nigeria cannot go on in
its present form. It is inevitable that hard choices have to
be made in order to improve quality of teaching and
learning and curriculum and reduce the social cost of
graduate unemployment in Nigerian.
RECOMMENDATIONS
The following recommendations should be given
serious consideration if the existing widening gap in the
labour market for Nigeria graduates should be bridged.
C
C
C
Establishment of Labour Market Information
System (LMIS): This refers to an institutional
arrangement whereby information, concerning the
size and composition of the labour market, the way it
functions, noting its problems, opportunities and the
employment related demands of participants is
collated and analyzed.
Needless to say that obtaining accurate information
on labour market is perhaps the most daunting
challenge confronting policy markers and planners,
academicians, employers of labour and even job
seekers interested in labour market information. The
institutionalization of a system for effective
collection, measurement, evaluation and analysis of
information on skill composition and requirement,
training opportunities, productivity, wage levels,
working conditions, vacancies and labour
regulations, is an urgent requirement as a precondition for narrowing or closing the gap between
the world of work and the world of learning. There is
need, in this regard to invigorate the recently
established labour exchange institution to properly
perform that role.
Establishment of a legal framework for labour
market information management: At present, there
seems to be no broad based legal framework in the
country supporting the collection and dissemination
of labour market information. A few statutes on
labour matters are silent on the issue of labour market
information management or superficial in the
handling of such issues. There is therefore, the need
to institute a legal framework that will make it
mandatory for all stakeholders in labour related
issues to supply accurate and timely information on
labour matters.
Establishment and improvement of national
database: Although keeping of database is not a new
phenomenon in Nigeria, but the approach used have
been uncoordinated and disaggregated. There is need
to institute a national date base on labour matters
using new technology of information and
communication in order to improve on the
availability and usefulness of labour market
information.
Improving the quality of work force: It must be
understood, that the main problem facing the
Nigerian labour market is not lack of labour but lack
of highly skilled labour. This is explained by the fact
that while shortages exist in some specialized skill
areas, large scale unemployment exists side by side.
The deteriorating quality of the work force has been
shown in the falling standard of education especially
at the university level. It is generally believed that the
falling quality of university education is a reflection
of the outmoded content of most university curricula,
the low morale of academic staff, the inadequacy of
learning facilities and resources and the poor funding
of the university by the government. Therefore, the
solution to this problem lies in taking concrete steps
to update the academic content of the university
curricula, improve the morale of academic staff
through adequate incentives, on-the-job training and
exposures to workshops and seminars and the
improvement in the general funding of the university
by the government. Finally, there is the need for
universities in Nigeria to partner with the private
sector on a mutually beneficial basis, such that the
products from the universities can be timely available
and relevant to the needs of the industry.
REFERENCES
Ajayi, S.I., 2002. Institutions the missing link in the
growth process. In: Proceedings of Nigerian
Economic Society (NES) Annual Conference, pp:
1-22.
Akintoye, I.R., 2008. Reducing unemployment through
the informal sector: A case study of Nigeria. Europ.
J. Econ. Finan. Admin. Sci., 11: 97-106.
Anyanwu, G.A. and I.C. IIoeje, 1998. Graduate
Employment Survey. In: Tracer Study of the
Gradates of the Faculties of Arts. Agriculture and
Education of the University of Nigeria, pp: 56-97.
Atoyebi, G.O. and M.O. Odedokun, 1987. Conceptual
framework for analyzing the national and policy
implications of distortions. In. Proceedings of NES
Annual Conference, pp: 1-10.
Dabalen, A., B. Oni and O. Adekoka, 2000. Labour
market prospects for university graduates in Nigeria.
High. Educ. Manage., 14: 1-36.
Ekpo, A.H., 1987. Distortions in economic theory and
method: The Nigerian scene. In: Proceedings of NES
Annual Conference, pp: 1-8.
Ekpo, A.H., 2008. The Nigerian economy: Is it at the
crossroad? In: Presidential Address at the NES
Annual Conference, pp: 67-105.
Essien, E.B and J.A. Atan, 2006. Generating employment
in Nigeria: The role of rural agriculture. Afri. J.
Stabil. Dev., 2(1): 111-136.
75
Curr. Res. J. Econ. Theory., 4(3): 67-76, 2012
Obadan, M.I. and A.F. Odusola, 2003. Productivity and
Unemployment in Nigeria.
Omoifo, C.N., G.A. Bodmus and D. Awanbor, 1997.
Education and achievement in the early career of the
university of Benin Graduates. In: Report of 1996
Uniben Graduate’s Survey. University of Benin,
Benin City, pp: 110-185.
Pauw, K., M. Oosthuizen and C. Van Der Westhuizen,
2008. Graduate unemployment in the face of skills
shortages: A labour market paradox. S. Afr. J. Econ.,
76(1): 45-57.
Saint, W., T.A. Hartnett and E. Strassner, 2003. Higher
education in Nigeria: A status report. High. Educ.
Pol., 16: 259-281.
Ugwuonah, G.E. and K.C. Omeje, 1998. Higher
education and the demand for manpower
development in the Nigerian manufacturing sector:
An empirical study of enugu and anambra sate. In:
Tracer Study Research Project, pp: 58-72.
Webb, R.C., 1977. Some Characteristics of Urban labour
Market Structure and Movement and Urban Poverty
in Latin America. World Bank, Washington, D.C.,
pp: 705-768.
World Bank, 1983. World Development Report.
Federal Government of Nigeria: National Manpower
Board, 1998. The Study of Nigerian Labour Market:
Phase one-Lagos State. Manpow. Stud., 30: 10-55.
Gbosi, A.N., 2006. Modern Labour Economics and Policy
Analysis. Park Publishers, Abakiliki, pp: 56-92.
Iniodu, P.U. and I.I. Ukpong, 2001. A Synopsis of the
History of Economic Through: From the Greek
philosophers to John Maynard Keynes. Centre for
Development Studies, University of Uyo, Uyo.
Iyoha, M.A. and O. Oriakhi, 2002. Explaining African
economic growth performance : The case of Nigeria.
Afr. Econ. Res. Consort., 23(1): 1-65.
Kannappan, S., 1985. Urban employment and the labour
market in developing nations. Econ. Dev. Cul.
Change, 33(4): 698-730.
Kayode, M.O., 2004. Towards a Re-Birth of Nigeria’s
Economic Development. In: Fourth Annual Public
Lectures, NES, pp: 3-37.
Magee, S.P., 1973. Factor market distortions, production
and trade: A survey Oxford Econ. Papers, 25(1):
1-43.
Morley, H., 2001. Producing new workers: Quality,
equality and employability in higher education. Qual.
High. Educ., 7(2): 131-138.
76